AWS Savings Plan Calculator

Estimate your potential cost savings by committing to a consistent amount of AWS usage. Savings Plans offer flexibility across compute services and regions.

Savings Plan Savings Estimator

On-Demand Spend Breakdown

Monthly Usage Cost Breakdown

Service Category	Monthly On-Demand Spend	Estimated Savings Plan Commitment	Potential Savings
Compute (EC2, Fargate, Lambda)	$0.00	$0.00	$0.00
SageMaker	$0.00	$0.00	$0.00
Other AWS Services	$0.00	$0.00	$0.00
Total Monthly Spend/Commitment			$0.00

Monthly Cost Comparison: On-Demand vs. Savings Plan

Visual comparison of monthly costs with and without Savings Plans.

What is AWS Savings Plan?

AWS Savings Plans are a flexible, pricing model that offers lower prices on AWS cloud usage in exchange for a commitment to a consistent amount of usage, measured in £/hour (or $/hour), for a 1 or 3 year term. Unlike Reserved Instances (RIs), Savings Plans provide a more generalized discount that automatically applies to compute usage across different instance families, regions, and services, including Amazon EC2, AWS Fargate, AWS Lambda, and Amazon SageMaker.

Who should use it?

• Organizations with consistent or predictable AWS compute usage patterns.
• Companies looking to optimize their cloud spending without being locked into specific instance types or regions.
• Teams that require flexibility in their deployment strategies but want to leverage cost savings.
• Businesses that have a good understanding of their baseline compute workload.

Common Misconceptions:

• Misconception: Savings Plans are just like Reserved Instances. Reality: Savings Plans offer broader applicability and flexibility, automatically applying discounts across EC2, Fargate, Lambda, and SageMaker, not just specific instance types.
• Misconception: You must commit to a specific instance type. Reality: Savings Plans (specifically Compute Savings Plans and EC2 Instance Savings Plans) abstract away instance-specific commitments, offering discounts on eligible compute usage regardless of instance family, size, operating system, tenancy, or region.
• Misconception: Savings Plans require manual management to apply discounts. Reality: Discounts are automatically applied by AWS to eligible usage, simplifying cost management.

AWS Savings Plan Formula and Mathematical Explanation

The core calculation for estimating savings involves understanding the commitment amount based on your on-demand spend and the offered discount, then projecting this over the commitment term.

Step-by-step derivation:

1. Determine Average Monthly On-Demand Spend: This is the baseline cost without any discounts applied.
2. Calculate Average Hourly On-Demand Spend: Divide the average monthly spend by the average number of hours in a month (approximately 730 hours). $ \text{Hourly On-Demand Spend} = \frac{\text{Monthly On-Demand Spend}}{730} $
3. Determine the Savings Plan Commitment: This is the amount of usage you commit to paying for per hour. With a specific discount percentage, the commitment is effectively covering usage that *would have cost more* at on-demand rates. The Savings Plan price is a percentage of the on-demand price. For simplicity in calculation, we can directly derive the commitment amount needed to achieve the savings. The core idea is that you commit to spending a certain amount per hour at a *discounted* rate, and AWS gives you more compute for that committed amount. A more direct way to calculate the *savings* is to consider what you’d pay without it versus with it. If you commit to spend $X per hour at a discount of Y%, the total spend over the term is fixed at $X \times \text{Term} \times \text{Hours}$. The *value* of the plan is realizing that the $X commitment covers usage that would have cost $X / (1 – \text{Discount Percentage})$ at on-demand rates. However, for a savings calculator, we are given the on-demand spend and the discount percentage. We assume the user wants to commit based on their current spend.
4. Revised Commitment Calculation for Savings: A more practical approach for a calculator is to calculate the potential savings directly. If you spend $D$ per month on demand, and commit to a Savings Plan with a discount of $P$%, your commitment amount per hour will be lower. The savings are realized by purchasing compute that would have cost more at on-demand rates for your committed spend. The actual commitment amount needed to *achieve* the savings is often less than the on-demand spend. However, for estimation, we can calculate the *potential savings* if you were to fully leverage a plan that offers a $P$% discount on your current on-demand spend.

   The *cost* of the commitment is effectively the on-demand spend reduced by the discount, but applied to the committed hourly rate.
   Let’s use a simpler model focused on the *savings* achieved:

   Cost Saved per Hour = (On-Demand Hourly Rate) * (Discount Percentage)
   
   Total Savings over Term = (Cost Saved per Hour) * (Total Hours in Term)
   
   If we have Monthly On-Demand Spend ($M$), the equivalent Hourly On-Demand Spend is $H = M / 730$.
   The Discount Percentage is $D$.
   The Commitment Term in Years is $T$.

   Savings per Hour = $ H \times D $
   Total Hours in Term = $ 730 \times 12 \times T $

   Total Potential Savings = $ (H \times D) \times (730 \times 12 \times T) $
   Substituting $H = M / 730$:

   Total Potential Savings = $ \left( \frac{M}{730} \times D \right) \times (730 \times 12 \times T) $

   Total Potential Savings = $ M \times D \times 12 \times T $

   This simplifies to: Total Potential Savings = Monthly On-Demand Spend × Discount Percentage × Commitment Term (Years).
   This is the most straightforward calculation for estimating the *maximum potential savings* if your usage perfectly matches the commitment.

Variable Explanations

Variable	Meaning	Unit	Typical Range
Monthly On-Demand Spend	Average amount spent on AWS compute services per month without any discounts.	£/Hour or $/Hour	$100 – $1,000,000+
Commitment Discount Percentage	The percentage discount AWS offers for a given Savings Plan commitment. Varies by plan type and commitment level.	%	10% – 66%
Commitment Term	The duration (in years) for which the usage commitment is made.	Years	1 or 3
Potential Savings	The estimated total cost reduction achievable over the commitment term.	£/Year or $/Year	Varies

Practical Examples (Real-World Use Cases)

Let’s illustrate with two scenarios:

Example 1: Small Startup Optimization

• Scenario: A growing startup has a fairly stable baseline of EC2 usage.
• Inputs:
  • Average Monthly On-Demand Spend: $5,000
  • Commitment Discount Percentage: 35% (Targeting Compute Savings Plans)
  • Commitment Term: 3 Years
• Calculation:
  • Annual On-Demand Spend = $5,000/month * 12 months = $60,000
  • Commitment Amount (Annual) = $60,000 * (1 – 0.35) = $39,000 (This is the effective spend needed to get the discount. The *savings* are calculated differently)
  • Potential Savings (Annual) = $5,000/month * 0.35 (discount) * 3 years = $5,250/year
• Financial Interpretation: By committing $39,000 annually (effectively paying $3,250/month instead of $5,000/month for the same compute resources), the startup can save approximately $5,250 per year on their AWS bill. This frees up capital for other growth initiatives.

Example 2: Large Enterprise Cost Reduction

• Scenario: A large enterprise has significant, predictable EC2 usage across multiple regions and instance families.
• Inputs:
  • Average Monthly On-Demand Spend: $100,000
  • Commitment Discount Percentage: 45% (Achieved through a larger commitment)
  • Commitment Term: 3 Years
• Calculation:
  • Annual On-Demand Spend = $100,000/month * 12 months = $1,200,000
  • Commitment Amount (Annual) = $1,200,000 * (1 – 0.45) = $660,000
  • Potential Savings (Annual) = $100,000/month * 0.45 (discount) * 3 years = $162,000/year
• Financial Interpretation: The enterprise commits to $660,000 annually, securing a substantial discount. Over three years, this commitment is projected to yield savings of $162,000 per year, significantly reducing their operational expenditure. The flexibility of Savings Plans allows them to reallocate compute resources as their needs evolve without losing the discount.

How to Use This AWS Savings Plan Calculator

1. Enter Monthly On-Demand Spend: Input your average monthly AWS bill for compute services (EC2, Fargate, Lambda, SageMaker) in the first field. This is the cost before any discounts.
2. Select Commitment Discount Percentage: Choose the discount percentage AWS is offering for the Savings Plan you are considering. This is typically found in the AWS Cost Management console when exploring Savings Plans options. Higher commitments usually result in higher discount percentages.
3. Choose Commitment Term: Select either a 1-year or 3-year commitment. Longer terms generally offer greater discounts.
4. Click “Calculate Savings”: The calculator will immediately display your estimated annual savings.
5. Review Intermediate Values: Check the “On-Demand Spend (Annual)”, “Commitment Amount (Annual)”, and “Potential Savings (Annual)” for a clearer picture of the financial impact.
6. Analyze Usage Table: The table breaks down potential savings across different service categories, providing insights into where your spend and potential savings lie.
7. Interpret Chart: The chart offers a visual comparison, making it easy to grasp the cost difference between paying on-demand versus utilizing Savings Plans.
8. Decision Making: Use these figures to assess the financial viability of purchasing AWS Savings Plans. Consider if your usage is stable enough to maximize these savings. Remember that the calculated savings represent the *maximum potential* if your usage aligns perfectly with the commitment.

Key Factors That Affect AWS Savings Plans Results

1. Usage Predictability: The most critical factor. Savings Plans provide the best return when your actual compute usage closely matches your committed amount. Highly variable or unpredictable workloads may not fully utilize the commitment, reducing the effective savings.
2. Discount Percentage Achieved: Not all commitments yield the same discount. AWS offers tiered discounts based on the hourly commitment amount. Higher commitments typically unlock higher discount percentages, leading to greater savings. Researching the specific discount tiers is crucial.
3. Commitment Term (1 vs. 3 Years): A 3-year commitment generally offers a significantly higher discount percentage compared to a 1-year term. The decision depends on your organization’s long-term cloud strategy and financial flexibility. Longer terms lock in costs but also provide deeper savings.
4. Service and Region Coverage: While Compute Savings Plans offer broad coverage across EC2, Fargate, Lambda, and SageMaker in all regions, EC2 Instance Savings Plans are specific to EC2 and offer the highest discounts. Understanding which plan best fits your workload mix is essential for maximizing savings.
5. Instance Family and Size Flexibility: Savings Plans (especially Compute Savings Plans) are highly flexible, applying discounts across different instance families and sizes. This adaptability is a key advantage over older Reserved Instances, allowing cost optimization even as your infrastructure needs change.
6. Cost of Capital / Inflation: Committing funds for 1 or 3 years means those funds are unavailable for other investments. The time value of money and potential inflation rates should be considered, especially for longer terms. A 3-year commitment today might represent a higher real cost in the future if inflation rises significantly.
7. AWS Pricing Changes: While less common for core services, AWS does occasionally adjust pricing. Significant, unexpected price reductions in on-demand instances could theoretically reduce the *relative* savings from a Savings Plan, though the absolute discount typically remains.
8. Management Fees and Overheads: While Savings Plans themselves don’t have direct management fees, the process of analyzing usage, choosing the right plan, and monitoring utilization requires resources. These indirect costs should be factored into the overall decision.

Frequently Asked Questions (FAQ)

What is the difference between Savings Plans and Reserved Instances?

Savings Plans offer greater flexibility. While RIs are tied to specific instance families, regions, and operating systems, Savings Plans provide a discount on usage across various EC2 instance types, Fargate, Lambda, and SageMaker. Compute Savings Plans offer the broadest applicability, while EC2 Instance Savings Plans offer deeper discounts specifically for EC2 usage.

Can I change my Savings Plan commitment after purchasing?

No, once purchased, the commitment term and amount are fixed. However, you can purchase additional Savings Plans or modify your usage patterns to better align with your existing commitments.

What happens if my usage drops below my commitment level?

You still pay for the committed amount. The discount applies to your actual usage up to the committed level. If your usage is less than the committed amount, you essentially pay for the committed amount, and the unused portion does not generate additional savings but doesn’t incur extra charges beyond the commitment itself.

Do Savings Plans apply to all AWS services?

No. Compute Savings Plans primarily apply to Amazon EC2, AWS Fargate, AWS Lambda, and Amazon SageMaker. EC2 Instance Savings Plans apply only to EC2 instances. Other services like S3, RDS, etc., are not directly covered by these compute-focused Savings Plans.

How does AWS determine the “Commitment Discount Percentage”?

The discount percentage is determined by the amount of your hourly commitment. AWS provides a pricing table showing the discount levels for different commitment amounts per hour. Committing to a higher dollar amount per hour generally unlocks a higher discount percentage.

Is it better to choose a 1-year or 3-year Savings Plan?

It depends on your organizational stability and forecast accuracy. 3-year plans offer deeper discounts (up to 66% vs. ~30-40% for 1-year plans), leading to higher absolute savings. However, they require a stronger conviction in your long-term usage patterns. If your needs might change significantly, a 1-year plan offers a balance of savings and flexibility.

How can I see my current Savings Plans utilization?

You can monitor your Savings Plans utilization, coverage, and savings in the AWS Cost Management console under the “Savings Plans” section. This helps you understand if your commitment is fully utilized and where potential optimizations lie.

Are Savings Plans recommendations available?

Yes, AWS provides Savings Plans recommendations based on your historical usage data. These recommendations suggest the optimal commitment amount and term to maximize your potential savings, which can be a valuable starting point for using this calculator.

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